Traced old pension schemes. Now what?

wann1e

I used the governments Pension Tracing service to locate my pensions from previous employment throughout the years and I have only a few bits and pieces to sort out before sending the appropriate information but i have no idea what to do afterwards.
Should I collect the money and put it into a savings account?
Invest it?
Looking at what (I assume are) options are available is a bit confusing to me :huh: and am looking for help in figuring out what is best or a prod in the right direction to find who is best to talk to.
Many thanks!

kidmugsy

Sort them into Defined Benefit (DB) schemes - where your pension will be related to your Final Salary when you left the scheme - and Defined Contribution (DC) - where you have a "pot" of money invested, accumulated from your and the employer's contributions.

The first sort will probably be best left alone, though you can always ask them to quote a Cash Equivalent Transfer Value (CETV). You'd probably consider transferring out from a DB pension into a pension of the second sort (DC) only if one or all of these apply: (i) poor health, or other objective reason to expect short lifespan, (ii) no spouse or dependants, (iii) view finances of scheme or supporting employer as dodgy, (iv) have a compelling reason to prefer the benefits as a pension "pot" rather than an inflation-protected pension.

The second sort - the ones with a pension "pot" - you will either buy annuities with, or you will manage them yourself and use income withdrawal (aka income drawdown). The one generalisation that's pretty safe is that you will want to take the 25% tax-free lump sum, unless you hope to leave these funds to children or widow, or whomever. If the number of these DC schemes is large, you may find it convenient to transfer them so that you are dealing with only one or two. Destination providers might be chosen from Hargreaves Lansdown, Cavendish, AJ Bell, and others as mentioned regularly on the "monevator" blog.

Once you've categorised them all, you could always return here for more suggestions.

mark55man

Also remember that different schemes have different benefits, and some of the older schemes may have benefits that are very valueable (guaranteed returns / index linking / spouse benefits)

So try and get a feel for what each is offereing - some effort now, could unveil wrinkles/entitlements that could be worth hundreds every year for the rest of your life

So spend some time - it looks like you have wisely started early - don't rush and you may need to get the T&C from each scheme and learn to understand them

Maelwys

wann1e wrote: »

Should I collect the money and put it into a savings account?
Invest it?

1. As the above posters have already suggested, my first consideration would be are any of those pensions "Defined Benefit" (like a mid salary or final salary workplace scheme) because if so then you'll probably be better off leaving them where they are.

2. My second consideration would be when are you planning to retire and what regular income can you currently expect to get? (This can be a mixture of Defined Benefit annuities and the State Pension plus any personal investments you might have or rental income, etc). How does this compare with the income you would want to have to live on?

After you lift out the Defined Benefit pensions, you'll probably be left with a bunch of other pots which it might well be worth consolidating into a SIPP (personal pension).

Once you have it in a SIPP you can do whatever you want - the usual recommendation would be to invest it and then upon retirement draw out as much money every year as you can without putting you over a higher Tax threshold. You could use the pot to buy a Fixed or Lifetime Annuity to supplement your retirement income, but Annuity rates are currently very poor so you'll probably see a lot of people just drawing out the pot and reinvesting whatever they don't need.



A few other things to consider:

The State Pension is going to kick in for you from a certain age, and depending on another few factors you might get an additional Secondary State pension (if retiring before April 2016) or get the "New State Pension" instead (if retiring after that - if over 55 you can check what you'll be entitled to under the new rules as it isn't always straightforward: see here).

If you're planning to retire BEFORE your State Pension Age, then you'll likely need some form of additional income. If waiting until your State Pension Age, you'll be more flexible (one option is to increase the value of the State pension such as deferring it by a few years - see http://www.moneysavingexpert.com/savings/state-pensions#delay )

Once you're over 55, you can start using a new SIPP to make you an extra bit of money each year.

Do you CURRENTLY have a pension deal with an employer? Do they match contributions? Would it be worth transferring some/all of your pension pot to their scheme?

dunstonh

Should I collect the money and put it into a savings account?

What makes you think that is better?
Typically that is the worst option for retirement planning and carries high risks.

Invest it?

If the pensions are money purchase then they are already invested. If they are defined benefits then these are typically better than investments.

jem16

wann1e wrote: »

but i have no idea what to do afterwards.

The best answers to this will depend on what age you are now?

wann1e

dunstonh wrote: »

What makes you think that is better?
Typically that is the worst option for retirement planning and carries high risks.

I never said it was, I was just mentioning it because I have no clue what to do with it and a savings account popped into my head.

wann1e

jem16 wrote: »

The best answers to this will depend on what age you are now?

I am 31. I have my first baby on the way and decided to have a look into it.

dunstonh

I never said it was, I was just mentioning it because I have no clue what to do with it and a savings account popped into my head.

at 31 you cant do that anyway and it would be a bad option too. So, you can eliminate it

wann1e

dunstonh wrote: »

at 31 you cant do that anyway and it would be a bad option too. So, you can eliminate it

Cheers, I wasn't sure about it and I couldn't find any clarification on what I am able to do with it.

I'll have a good read of all the info posted which I am very, very thankful for!
Hopefully I'll find something that works best for me

Maelwys

wann1e wrote: »

I am 31. I have my first baby on the way and decided to have a look into it.

Since you need to be 55 before you can actually get your hands on any of the money in your pension(s), your options are basically limited to transfering pots from one scheme to another (beit an existing employer scheme or a SIPP).

It'd probably be OK to transfer any Defined Contribution (pot) pensions you have into a SIPP if you want to consolidate them now, but make sure to double-check their fees first.

If you're just starting to think more about long-term financial planning then you could do worse than just save a bit each year into a Stocks + Shares ISA (investing in Bonds or Equity or whatever, depending on what level of risk you're willing to take) since you can get at the money when you need to but it'll have a better chance of long-term growth than a savings account. VCTs are another option but a little more complex. Then whenever you get closer to 55 you can worry about moving whatever you want into a SIPP to get the extra tax relief.

For now just make sure to leave any old Defined Benefit Pensions where they are, and it'd probably be wise to keep paying into your Employer's Pension Scheme (if any) to get their matched contributions.